Bahrain has been granted permission to stage the most coveted event on its calendar, the Formula One Grand Prix, in a move that has drawn condemnation from human rights groups angered by a three-month crackdown against anti-regime protesters.

The event will be held in October.It had been originally scheduled for March but was postponed as clashes intensified between Bahrain's majority Shia population and the Gulf kingdom's security forces, heavily backed by the forces of Saudi Arabia and other Gulf states.

Pressure on organisers to not reschedule the motor race had been intense, with a Facebook campaign calling for cancellation getting 320,000 signatures. At least a quarter of staff from the Grand Prix's organising committee, Bahrain International Circuit, all of them Shia, were sacked in April after being accused of taking part in anti-government demonstrations.

Formula One boss Bernie Ecclestone had earlier indicated that staging the race in Bahrain would be difficult if widespread allegations of discrimination and torture against civilians were proven. Sports teams had lobbied Ecclestone and Formula One executives not to hold the event, citing numerous human rights violations.

The sport's organising body, the FIA, said: "After considering all the factors … and taking into consideration all stakeholders' concerns, the World Motor Sport Council unanimously agreed to reinstate the Bahrain Grand Prix … this decision reflects the spirit of reconciliation in Bahrain, which is evident from the strong support the race receives from the government and all major parties in Bahrain, including the largest opposition group, all of whom endorse the Formula One grand prix and motorsport in the country."

The decision has angered human rights activists. Alex Wilks, the Avaaz campaign director whose online poll to ban the race was backed by hundreds of thousands of people, including former world champion Damon Hill, said: "Formula One's decision is a kick in the teeth for the Bahraini people. The race will happen in a country where government troops continue to shoot and arrest peaceful protesters.

"Money has trumped human rights and good judgment, so now Formula One, plus Red Bull, McLaren, Ferrari and every other team will be directly linked with a bloody crackdown that's ruined the lives of hundreds of innocent people."

Amnesty International has claimed that serious human rights abuse continues in Bahrain; more than 2,000 people had been suspended or sacked from jobs because they had been part of protests.

Zayad R al-Zayani, the chairman of the Bahrain International Circuit, hailed the FIA decision: "This is welcome news for all of Bahrain. As a country we have faced a difficult time, but stability has returned; with businesses operating close to normal, the State of National Safety lifted and countries removing travel restrictions.

"Importantly, it will also offer a significant boost to the economy. The Grand Prix attracts 100,000 visitors, supports 3,000 jobs and generates around $500m of economic benefit. Its positive effect will be felt throughout the country."

Three months of martial law imposed by the ruling monarchy were lifted this week, but recriminations from the anti-regime protests continue that have paralysed the kingdom are still being played out. Some of those arrested are still being tried in secret by a powerful judicial body set up under emergency laws. Several dozen doctors and nurses remain under arrest. And Human Rights Watch claims the number of people detained could top 1,000.

Clashes have continued in the four days since martial law was lifted, though not on the same scale as the running battles seen in mid-February and March. Security forces again fired rubber bullets and bird shot at demonstrators in several parts of Manama on Friday.

Authorities have been pursuing Shia opposition supporters who staged street marches to demand greater freedoms, equal rights and an elected government in the island kingdom. As the violence intensified, the calls for reform became calls for an overthrow of the 200-year-old Sunni dynasty, which demonstrators say actively discriminates against the country's majority Shia population.

The kingdom accused Iran of inciting the demonstrations and invited in Saudi forces under heavy pressure from Riyadh to help quell dissent.

The Formula One Teams' Association – which represents 11 of the marques, with Hispania Racing the exception – is to look into the FIA decision.

A McLaren spokesperson said: "All FOTA teams, of which McLaren is one, acknowledge the decision made by the FIA World Motor Sport Council today. That decision is likely to be discussed internally within FOTA, and a more detailed joint position may be defined after those discussions have taken place."

Hill, the 1996 world champion, and Max Mosley, the former FIA president, have both called for the Bahrain race to be abandoned, while Red Bull's Mark Webber is the only driver to speak out against the country hosting the race.